U.S. Faces Another Year of Uncertainty, Volatility, Economists Warn

The failure of the supercommittee to cut at least $1.2 trillion from the country's deficits and instead fall back on automatic cuts is not good for the economy and will fuel more uncertainty and market volatility in 2012 typical of the latter half of this year, economists say.

The supercommittee, made up of six congressional Democrats and six Republicans, was created in wake of the debt ceiling impasse last August to recommend ways to cut at least $1.2 trillion from spending.

They failed, and $1.2 trillion in automatic cuts will kick in, half in military budgets and half in entitlement programs.
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Companies, however, will take note of the ongoing political deadlock and indecisiveness, likely holding off on investment, which the economy badly needs to lower unemployment rates.

"Now is not the time for bold, expansive action by business," says Michael Drury, chief economist at McVean Trading & Investments, according to the Wall Street Journal.

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"Rather it is still a period to husband one's resources and hunker down until better information is available."

Taxes are serving as a road block, with Republicans opposed to tax hikes while Democrats argue more government revenue may be necessary to narrow deficits.

Outside experts say no major decisions will come until after the 2012 presidential elections.

"'For this Congress, you might as well send the lilies for tax reform," says Dean Zerbe, former tax counsel to the Senate Finance Committee and now national managing director of Alliantgroup, a tax consulting firm, according to the Associated Press.

"We will not do anything significant on taxes until after the election, and even after that it may take a while."

The failure of the supercommittee to cut at least $1.2 trillion from the country's deficits and instead fall back on automatic cuts is not good for the economy and will fuel more uncertainty and market volatility in 2012 typical of the latter half of this year, economists...